Request By:
Mr. J. B. Spaulding
Mayor, City of Ravenna
Office of the Mayor
Ravenna, Kentucky 40472
Opinion
Opinion By: Steven L. Beshear, Attorney General; By: Thomas R. Emerson, Assistant Attorney General
This is in reply to your letter raising a question as to whether a city may impose an occupational license tax on public utility companies. The city mailed its tax notices to various companies, including the Continental Telephone Company of Kentucky and the local television cable company, both of which paid the tax. The city received no reply from Kentucky Utilities Company but Columbia Gas of Kentucky, Inc. refused to pay the occupational license tax. You state that Columbia Gas, to your knowledge, holds no franchise from the city but, if it does, it pays no franchise fee to the city. The city receives a franchise fee from Kentucky Utilities Company but the cost to the company is added to the bills of the company's customers.
In its letter to the city, Columbia Gas maintains that the city cannot impose its tax against the company because the company pays the public service corporation property taxes set forth in KRS Chapter 136.
Your specific question is whether Kentucky Utilities Company and Columbia Gas of Kentucky, Inc. are required to pay the city's occupational license tax.
KRS 92.281 which authorizes legislative bodies of cities of all classes to levy and collect any and all taxes provided for in Section 181 of the Kentucky Constitution, provides in subsection (3) as follows:
"This section shall not in any wise repeal, amend, affect or apply to any existing statute exempting property from local taxation or fixing a special rate on proper classification or imposing a state tax which is declared to be in lieu of all local taxation, nor shall it be construed to authorize a city to require any company that pays both an ad valorem tax and a franchise tax to pay a license tax. (Emphasis supplied.)
KRS 136.120 deals with the public service corporation property tax and includes within its coverage gas companies and electric light and power companies. These companies are required to annually pay a tax on their operating property to the state and to the extent such property is liable to taxation, they shall pay a local tax thereon to the county, incorporated city, and taxing district in which its operating property is located. KRS 136.120(3) gives the Department of Revenue the sole power to value and assess all of the property of every corporation, company, association, partnership or person performing any public service.
In OAG 63-592, copy enclosed, we said that the provision [KRS 92.281(3)] prohibiting the imposition of a local license tax does not depend upon whether the public service corporation has a franchise from the community in which it is operating but whether or not it pays both a franchise tax and an ad valorem property tax. Mr. Charles Schroff, Department of Revenue, property Valuation Division, 592 E. Main Street, Frankfort, Kentucky 40620 (Telephone: Area Code 502 - 564-6730), advises that both Kentucky Utilities Company and Columbia Gas of Kentucky, Inc. are now and have been conforming with the requirements of KRS 136.120. You may wish to contact Mr. Schroff for additional information concerning the application of this particular statute.
In City of Covington v. Cincinnati, Newport & C.Tr. Co., Ky., 515 S.W.2d 617 (1974), the Court said in part as follows:
"In City of Pikeville v. United Parcel Service, Inc., Ky., 417 S.W.2d 140 (1967), we held that KRS 92.281(3) prohibits any city from imposing a license tax of any kind upon a company that pays ad valorem and franchise taxes levied pursuant to the terms of KRS Chapter 136.
We find nothing in the procedures and classifications established by the Kentucky Statutes in question which in any manner violates either the Constitution of Kentucky or the Constitution of the United States."
We are also enclosing a copy of OAG 77-721, to the effect that a franchise fee imposed by a city is not a franchise tax as contemplated by KRS 92.281(3).
Again referring to OAG 63-592, a further basis for rejecting the authority of a city to levy an occupational license tax on a public utility operating in the city is set forth in KRS 278.130(2). That statute, which provides for an assessment against public utilities to support the operations of the Public Service Commission, states as follows:
"The assessments provided for in this section shall be in lieu of all other fees or assessments levied by any city or other political subdivision for the control or regulation of utilities."
In conclusion, it is our opinion that a city may not levy an occupational license tax against public service corporations, including Kentucky Utilities Company and Columbia Gas of Kentucky, Inc., when those organizations pay ad valorem and franchise taxes levied pursuant to KRS Chapter 136.